So producing, let’s just say about half of the rise, if I would put it in rough terms and about the other half in O&A. And as I’ve mentioned, we see O&A as a recovery rather than a growth from a, kind of a steady state level and in that number you might see two-thirds of it be the market and a third be market share. But again, those are very rough estimates that we’re sort of looking at in our planning. Lots of things can move, but I hope what you take away from that is how broad based the sources that we’re looking at are. And as we’ve talked about, much of the revenue base becoming predictable around input drivers and output revenues that it produces alongside as we show you now a relatively predictable net interest income stream, including incidentally the breakout now of what we’re calling the banking book businesses, which include the financing in FIC.
So hopefully that’s some good color on what we’re seeing and is driving the raised guidance.
Andrew Coombs: It’s helpful, thank you.
Christian Sewing: Thank you. Thanks, Andrew.
Operator: Next question is from Andrew Lim [Société Générale]. Please go ahead with your question.
Andrew Lim: Hi, morning. Thanks for taking my question. So firstly, on that non-NII guidance that you’ve lifted, it does seem a large part of that is based on self help and investments, but I guess some part also based on market growth. So I guess my question here is what’s your assumption for GDP growth backing your guidance here and in particular for Germany? And then my second question is back on your cost guidance you’re guiding to €5 billion for 1Q and I guess about €20 billion for the year. But typically you’ve had about €5.3 billion, €5.4 billion for the 1Q and then a bit less than €5 billion for the remaining quarters to reflect the seasonality of stronger revenues in the first quarter. So just wondering how you’re thinking about that now? What’s happening with the seasonality through the year?
Christian Sewing: Yes. So, Andrew, thanks for the questions. So the bigger driver of the Q1 numbers has been the bank levy and we’ve had to go through the adjustment sort of hoops on that. And we think it was still to be finalized and determined, but we think that noise will be removed. And also, ironically we’ve had to book some bank levy in Q4 because of the way the dynamic works between the UK and the European bank levies. So in a sense brought forward some bank levy from 2024 into 2023. You’re right that there is some seasonality, especially with variable compensation bookings, but on a relative basis to a big number like €5 billion, that is not a massive driver. But something we look at and manage carefully, given the importance of it to our business.
On the assumptions of GDP growth, we just use a consensus view. And that consensus view obviously already reflects pretty muted GDP growth performance, especially in Germany. So zero, slightly negative, relatively muted in Europe, but in the United States and Asia, probably assumptions that right now are a little bit behind what the consensus views. To be fair, GDP isn’t necessarily the main driver of the engines that we’re talking about of the fee and commission income growth, I’d say it’s more activity. And by activity I mean loan fees on trade finance, which has been relatively muted. I mean transactions in terms of issuance where we also in our Trust and Agency and Securities get business, get fees on custody and also transfer agency and the like.
So it is activity levels that really are the driver and they cohere more just with corporate and household confidence than specifically GDP growth assumptions.
Andrew Lim: Many thanks for that.
Christian Sewing: Thank you, Andrew.
Operator: Next question is from Mate Nemes from UBS. Please go ahead.
Mate Nemes: Thank you, and well-done on the results today. A couple of questions from my side. First, as a follow-up, you mentioned that the non-NII revenue growth could be perhaps coming maybe two-thirds from market growth and one-third from market share growth. Looking at this and the €32 billion implied revenue target by 2025, could you give us a sense what degree of flexibility do you see on the cost side? Should perhaps some disappointment happen? Maybe from the market growth side, what levers do you have to pull? Should there be a disappointment on revenues? Because clearly you are doing a lot to hit that €20 billion adjusted cost target. That’s the first question. The second one is on capital management and specifically M&A.
I think we’ve heard you loud and clear that you’re focused on distribution mainly, but you’re also looking at perhaps accelerating growth in some areas and investing in the divisions. Do you see scope for perhaps bolt-on acquisitions along the lines of Numis here and there? And if that’s the case, where do you see opportunities? You can accelerate the organic growth and what would be your criteria? Thank you.
Christian Sewing: Thank you. Let me start with the last one. One cannot exclude that. And if there is an opportunity in one of our core businesses that we have an add-on acquisition, which makes sense from a content point of view, from a regional point of view, from a client point of view, and it fits into our culture, I wouldn’t exclude that. But it’s not the main focus of our strategy. And when we came to the previous questions and the headlines, I was referring to in particular the bigger M&A’s, which is not our priority. But if we would have an opportunity, I would always say we would potentially look at it. But again, we feel that with the existing platform we have, with the existing franchise we have, we are really on a good path to achieve the goals be it on the revenue side or on the cost side.
I like your questions on the cost side with regard to the flexibility. Yes, we have clearly an ambitious road on the non-NII, but I can see already how in particular in the O&A business, our investments, both in Numis by the way, which is running really well, but also the hiring of the people, which we have done, is adding in terms of mandates and also revenues. Also when I look now at Q1, but clearly if it’s not coming, we have a dynamic process. And that dynamic process is that the business has to explain to the CFO, but also to me what they are doing if the revenues are not coming through. Now, to be very honest, we build it for the long term. And I think it’s the right decision for us to expand in that business. But clearly if revenues would lag, then obviously you have various levers, be it in that area also variable comp.
We have other investments, which are part of our plan for those business, which we can reduce in this regard we would proactively, obviously countermeasure.
